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I'm reviewing my Home Owner's Policy and something struck me as odd. This is a Guaranteed Replacement Cost policy, but there are exceptions.

we will not pay more than the actual cash value at the time of the loss [...] for fine art, antiques, rare objects and other items which by their nature cannot be replaced with a comparable article;

While I guess that makes sense, what would "actual cash value" be? They give a definition at the beginning of the document:

actual cash value means the cost of replacement with materials of similar kind and quality less depreciation. In determining depreciation we will consider the condition immediately before the damage, the resale value (if personal property), obsolescence and normal life expectancy.

Ok, that's vague. Depreciation is normally not applicable to fine art. Appreciation is usually more of a concept that would apply. Resale value can be extremely arbitrary and difficult to determine, much less agree upon. "Obsolescence and normal life expectancy" wouldn't apply. Worried that "actual cash value" means the material cost of the canvas and paint, I noted they have a specific Fine Art Endorsement further down the document, which I could purchase for a modest premium. It reads:

We insure fine art but only:

• items valued up to $5,000, for which you have provided us with a complete description, including the year and value of the items; and

• items valued over $5,000, for which you have provided us with an appraisal of market value within 30 days of the effective date of this Endorsement. The appraisal must have been completed within the past 3 years.

Which I originally figured meant that so long as I have paid for this endorsement, I could value the art however I wish (with or without an appraisal as outlined above) given the premium varies based on the value. But then the next paragraph adds this in:

If you have a claim:

In the event of a claim insured by this endorsement we will pay the full cost of repair with materials of similar kind and quality, or replacement with a comparable article, whichever is less, without deduction for depreciation, up to the coverage limit for this endorsement on your Declaration. No deductible shall apply to this endorsement. However, we will not pay more than the actual cash value at the time of the loss:

• if repair or replacement is not complete as soon as reasonably possible and within one year following the date of loss; and

• for fine art which cannot be replaced with a comparable article.

Wait, what? That last bit brings us back to the situation we were at without the endorsement. The whole "fine art, antiques, rare objects and other items which by their nature cannot be replaced with a comparable article" bit.

Am I correct that paying the premium for that endorsement would be useless?

Why all this concerns me: I have several important (to me) pieces painted by relatively unknown artists. The cost of any given one was well under $5000, so appraisals don't apply but if I lost them I'd be out significantly. These artists are alive and, as far as I know, still actively painting... so if a piece were stolen, I'm sure I could commission a replacement. Is that cost the value with the endorsement? Without?

Perhaps the answer is to insure them separately with a company that specializes in Fine Art Collections. But of course I'd rather not pay extra if my normal house insurance does cover it (at least with the endoresement).

I called the company to ask. I thought the first person was just a trainee or something because all she did was regurgitate the policy wording verbatim. I asked to speak with someone "higher up" and that person didn't do much better. She was really vague and asked if I wanted the full policy sent to me. I assumed that would go into great detail, but it doesn't.

I'm shocked, really, how loosy-goosy they are while they're collecting premiums. The whole point of having insurance is in case of an event that requires it... and that's when the details matters.

Thoughts and opinions on how things would go down if a piece gets stolen?

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The practical answer is that the insurance is somewhat dependent on the reputation of the insurer. Legally, the verbiage of the contract applies: If you pay for the Fine Art endorsement, and you suffer a covered loss to a covered item under $5,000, they have three options to settle the claim within one year:

  1. Recover and repair the damaged item.
  2. Replace the item "with a comparable article." If they are a reputable insurer, they probably won't offer you a replacement with which you aren't satisfied. But it's possible they would hand you a "replacement" that you don't think is comparable, and they think is comparable. At that point you get to start a negotiation, which can end up in court if neither side settles sooner.
  3. Pay you the "actual cash value," without deductible or depreciation, which is determined by a claims adjuster based on whatever evidence you present and he can gather. Typically this would be the appraised value at time of loss (or the best approximation that can be made). Again, reputable companies don't stay in business by nickle-and-diming on claims. But it's possible you won't agree with their claim settlement, at which point you can appeal following whatever process is provided for in the insurance contract, and then to the courts if both sides want to fight.

Is this endorsement worth it? If I read your excerpts correctly: Loss to irreplaceable objects under the base contract is "actual cash value at the time of the loss...." With the endorsement, if they can't recover, restore, or replace "fine art, antiques, rare objects" then they will pay you the actual cash value without deductible.

I suspect you're missing some other relevant contract details: E.g., there are usually limits per loss event on all sorts of particular items. E.g., every standard HO policy I've looked at will, without an endorsement or individual scheduled coverage, limit to a defined amount (usually a few thousand dollars) payments for losses to categories like:

  • Bullion, cash, and negotiables
  • Firearms
  • Jewelry
  • Fine art

The endorsement probably also serves to lift that limit substantially.

  • I've gone through it fairly carefully (it is only 28 pages total, most of that on sections that don't pertain - rental properties, cottages, secondary residences, etc). There is a total limitation of $1000 for money, bullion, etc. Jewellery has a max of $7500 (also includes watches, gems and furs). Firearms aren't mentioned. Fine art is entirely as I've stated it. The only parts I left out were pertaining to items clearly not applicable. So if I read your take on it correctly, the benefit to the endorsement is really just the deductible. I guess that's something. – bcsteeve Oct 16 '16 at 23:26
  • Your "you can appeal following whatever process is provided for in the insurance contract" comment had me looking for any such process. I finally found it. "questions [relating to a dispute] must be determined using the applicable dispute resolution process set out in the Insurance Act". So now I have to dig up what that is. I don't know what jurisdiction that falls under, but I have some research to do. – bcsteeve Oct 16 '16 at 23:33
  • @bcsteeve - If you're in the U.S. then it's almost certainly a function of the state government. Every state I've checked has an Insurance Commission / Regulator or some such executive-branch entity, largely devoted to consumer protection. In fact, most states require insurers to have their contracts approved before they can be sold. So if you want to know how a claim scenario would "go down" under a particular policy and endorsement you might be able to get someone from the regulator to shed more practical light on it. – feetwet Oct 17 '16 at 0:33
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I'd make sure that I have evidence that the pictures exist at all. Then I'd read my policy carefully to see if they are covered or if you have to give notice of these pictures individually to the insurance company; I think my home insurance wants to know if there are any individual items valued at some high value. If you have four paintings that you say are worth $4,000 each I'd check with the insurance.

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